Correlation Between Tencent Holdings and Tencent Music
Can any of the company-specific risk be diversified away by investing in both Tencent Holdings and Tencent Music at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Tencent Holdings and Tencent Music into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Tencent Holdings and Tencent Music Entertainment, you can compare the effects of market volatilities on Tencent Holdings and Tencent Music and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Tencent Holdings with a short position of Tencent Music. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tencent Holdings and Tencent Music.
Diversification Opportunities for Tencent Holdings and Tencent Music
0.62 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Tencent and Tencent is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Tencent Holdings and Tencent Music Entertainment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tencent Music Entert and Tencent Holdings is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Tencent Holdings are associated (or correlated) with Tencent Music. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tencent Music Entert has no effect on the direction of Tencent Holdings i.e., Tencent Holdings and Tencent Music go up and down completely randomly.
Pair Corralation between Tencent Holdings and Tencent Music
Assuming the 90 days horizon Tencent Holdings is expected to generate 1.03 times more return on investment than Tencent Music. However, Tencent Holdings is 1.03 times more volatile than Tencent Music Entertainment. It trades about 0.02 of its potential returns per unit of risk. Tencent Music Entertainment is currently generating about 0.0 per unit of risk. If you would invest 4,960 in Tencent Holdings on October 25, 2024 and sell it today you would earn a total of 13.00 from holding Tencent Holdings or generate 0.26% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 97.44% |
| Values | Daily Returns |
Tencent Holdings vs. Tencent Music Entertainment
Performance |
| Timeline |
| Tencent Holdings |
| Tencent Music Entert |
Tencent Holdings and Tencent Music Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Tencent Holdings and Tencent Music
The main advantage of trading using opposite Tencent Holdings and Tencent Music positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tencent Holdings position performs unexpectedly, Tencent Music can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Tencent Music will offset losses from the drop in Tencent Music's long position.| Tencent Holdings vs. Autohome | Tencent Holdings vs. Arena Group Holdings | Tencent Holdings vs. Golden Grail Technology | Tencent Holdings vs. Asset Entities Class |
| Tencent Music vs. Baidu Inc | Tencent Music vs. Twilio Inc | Tencent Music vs. Spotify Technology SA | Tencent Music vs. Weibo Corp |
Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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